May 25, 2014

Too many people, including plenty of brand-new college graduates, fall far behind on their student loan payments for no good reason.

How many? The Department of Education does not supply much data on late payments. But the student loan expert Mark Kantrowitz, using data from lenders, estimates that between one-quarter and one-third of borrowers are late paying their first student loan bill.

It can get worse as the days and years go by. Last year, the Federal Reserve Bank of New York, using 2012 data from the credit bureau Equifax, determined that 35 percent of people under 30 who were supposed to be making student loan payments each month were actually 90 or more days delinquent.

Whatever the numbers, they add up to a normalization of tardiness that can damage the credit scores of young adults. And one big reason it’s happening is the fact that many among the indebted simply aren’t sure how many loans they have, how and when to pay them back correctly and how to find and use programs for people who can’t afford the full payments.

Some useful advice, and a calculator. And note this: “Let us pause for a moment to state the plain fact that the entire college financing system is a national disgrace. College costs are high, universities don’t counsel undergraduates well enough, families get in over their heads, there are too many types of loans, the repayment options are dizzying, and lenders and the companies that collect the payments are sometimes bad actors. . . . Universities don’t always make loans easily comprehensible either. Lauren Asher, president of the Institute for College Access and Success, remembers getting a financial aid letter in graduate school with an acronym that was so confusing that she couldn’t tell whether it referred to a loan or a grant.”

" If, on the other hand, all the terms are written out in standard English -- no matter how many lines of dense 8pt type it takes -- and you are trapped by your failure to read, question, or understand them -- then you are not a competent adult and should by law be prohibited from entering into contracts at all."

They threw those contracts straight out the window when they seized the debts in 09-10 or so.

You can't even get them to cough up your original promissory note; I know, I've tried. The current terms are whatever your servicer says they are, and nobody cares about the copy you might (or might not) have of the original agreement.

Hell, you can't even get them to send you what the current terms are - assuming you can even figure out who currently owns your loans. You may have more than one servicer claiming to own it and sending you bills; some of these companies like to sell the same loan to more than one party at once.

My contract stipulated life-of-the-loan servicing from my lender regardless of who owned the debt. It included specific amounts of flexible deferment. I now have neither, and whatever amount of deferment they deigned to give me has long since been burned up papering over their paperwork screwups.

These loan servicers that the Dept. of Education has farmed the seized loans out to are criminals, plain and simple. I see a lot of hate in here for "stupid" graduates from those who don't seem to fully understand that the rule of law is long gone.

"How many? The Department of Education does not supply much data on late payments."

They have the data. I can emphatically state that the Dept of Education most definitely does, and it is meticulous and detailed. How do I know? Because I wrote the software for two colleges to provide it. It is per some new and very onerous regulations issued by the Obama administration ('Gainful Employment'). They require colleges to report the status of all student loans (Title IV, institutional, and private), the net balance owed, plus all other forms of student aid received including vouchers, grants, and scholarships, etc. All this must be uploaded by the college to the National Student Loan Data System (NSLDS), on pain of losing Title IV eligibility.

The Department of Education knows everything: The default rate, the average debt load, with all demographics (IPEDS) by race, gender, age cohort, etc. All the info is there. They have it. If they aren't providing it to the public, it's because they don't want you to know.

I would add some advice as well. Avoid student loan consolidation loans as much as possible. They cut your payments now, but double or more the repayment period increasing the amount of interest you will repay by double or more.

I suspect most students are waiting for Democrats to pay off their loans with money from the government treasury.This would lead to a novel situation: Children paying for their parents' education (such as it is).

Landlords don't care about you being current on your student loans, and car companies weight being current on car payments so heavily that its not insurmountable. Credit card companies will give a 500-2k limit to anybody. So unless you want to buy a house, there isn't a whole lot of reasons to pay the student loans other than to keep the servicer from garnishing your wages/bank account.

I attended University in the early '80s. The counseling I received was minimal even when I asked. I changed majors 4 times. What I didn't know then, was I was seeking more of a liberal arts undergraduate education. That's ok and good to a point. It would have helped had my counselors asked me what all this changing was about and a curriculum could have been crafted that got me what I wanted and completion of a degree in 5 years instead of 6 --- remember I was working full time.

I look at a couple of things that made it possible for me to graduate with a degree earning a relatively high income compared to peers: 1) some of my peers were graduating with Literature or Fine Art degrees and reported back they were living just as poorly or worse as they did as students; and 2) I had to work full time while going to school because financial aid wasn't that easy to get in the "olden days."

Take away? I learned that there was an ROI to a degree AND took action.

Working and being responsible for my own welfare during college probably "saved" me big time. I left school with $7,000 of debt, paid off in three years due to the R&D Engineering lab job I got after graduation.

How will the youth of today learn anything about "making it" in this world if they continue to be insulated from reality during their college years?

Parents ought to understand what loans are, and what their effect will be in the future. Too many parents are idiots who go with what all other parents are doing without seriously considering what the effect will be on their children.

Parents are irresponsible and ignorant. And dangerously gullible. They have their heads in the sand so they won't see how the world has changed since they paid off their comparatively small student loans. And they have stars in their eyes regarding their Johnny's future earning potential.

Am I the only one who thought the process was easy? Right after I graduated I consolidated about 6 different loans. Got a year long break on payments when I did Americorps, which gave them a big lump payment when I was done. Refinanced at a low rate a couple years after that. Almost have them paid off now without a single late payment. Sallie mae website is easy to use too.

Thanks. This is helpful. My son will be taking out loans shortly and I'm quite nervous. He's going to an expensive school but will get a solid electrical engineering degree. He could have gotten tuition covered completely at a state school but chose this route. He's a hard worker and motivated to get out of debt as soon as possible.

It's time to FOIA request the Department of Education on defaults, delinquencies, and numbers of borrowers/volumes of loans in income contingent repayment programs versus the number able to make regular payments on the original terms of the promissory notes.

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